Alumis and Acelyrin to Merge

Alumis and Acelyrin, two biotechnology firms, are merging in an all-stock deal aimed at creating a more financially robust company with an expanded drug portfolio. Under the terms, Acelyrin shareholders will receive 0.4274 shares of Alumis stock for each of their shares. This will result in Acelyrin shareholders owning about 45% of the newly formed company, while Alumis shareholders will retain 55%. The unified entity will operate under the Alumis name and leadership team, and will have a substantial cash reserve of $737 million, projected to sustain operations until 2027.

The merger brings together the development projects of both companies, with a focus on Alumis's two TYK2 inhibitors. One inhibitor is being investigated for treating plaque psoriasis and lupus, while the other targets neuroinflammatory diseases such as multiple sclerosis. A key aspect of the merger is the inclusion of Acelyrin's leading drug candidate, lonigutamab, designed for thyroid eye disease. However, the continuation of this program is subject to further evaluation to ensure it stands out in a cost-effective manner.

Both companies had faced challenges with their stock prices prior to the merger. Acelyrin and Alumis had gone public in 2023 and 2024, respectively, raising $540 million and $250 million. However, both saw significant declines in their market valuations. Acelyrin initially went public to finance the development of its drug izokibep, aimed at various autoimmune conditions. Yet, after izokibep failed in a late-stage trial in September 2023, the company shifted focus to lonigutamab, though this strategy did not significantly boost its share price, which fell to below $2.

Alumis, on the other hand, experienced a two-thirds drop in its stock price since its IPO, despite advancing its TYK2 inhibitor. This inhibitor, a type of oral medication used for autoimmune diseases, lags behind similar drugs and enters a competitive market for such therapies. The only approved TYK2 inhibitor, Bristol Myers Squibb's Sotyktu, has not met commercial expectations. Alumis, however, believes its lead TYK2 drug, ESK-001, could outperform Sotyktu, with another drug candidate, A-005, showing potential for treating central nervous system inflammation. Upcoming clinical trial data for ESK-001 in psoriasis and lupus, and A-005 in multiple sclerosis, are eagerly anticipated.

The merger is seen as a strategic move to secure necessary funding for Alumis to reach these clinical milestones, while also offering Acelyrin stakeholders a chance to benefit from potential successes. Alumis CEO Martin Babler emphasized the importance of having a diverse portfolio and sufficient capital in a conference call with analysts, highlighting that the merger addresses both needs.

The future of lonigutamab remains uncertain. Acelyrin positioned it as a more convenient alternative to Amgen's thyroid eye disease drug, Tepezza. Yet, Wall Street analysts remain doubtful about its ability to distinguish itself from Tepezza and a competing drug from Viridian Therapeutics. Following discussions with management, Leerink Partners analyst Thomas Smith noted that plans for advancing lonigutamab into Phase 3 trials are on hold pending a thorough evaluation of early research data.

The merger is expected to be finalized by the second quarter, marking a significant step for both companies in navigating the competitive biotechnology landscape.